Sub-Saharan reforms get nod from world's bankers
Not all is economically gloomy in sub-Saharan Africa. A number of black African nations have launched reforms that offer hope for the future.
``Especially in the past two years, more countries have started to act and changes are going deeper than before,'' World Bank president A. W. Clausen noted in a speech scheduled for delivery in Bonn yesterday.
For his talk, Mr. Clausen drew some samples of progress in Africa from a new bank study. Entitled ``Financing Adjustment with Growth in Sub-Saharan Africa, 1986-90,'' the report contends that the reforms under way in much of Africa justify further financial assistance from the world's well-to-do nations.
In fact, Mr. Clausen maintains that the growing commitment to adjustment undertaken by African nations ``returns the ball directly into our court.''
Here are some areas of progress:
The economy -- With the arrival of rainfall in most of Africa, farm output this year in the poorest nations should equal or exceed pre-drought levels. Because of continued famine and strife, however, Ethiopia and Mozambique will continue to need help.
Also, lower oil prices and sharply higher coffee prices have boosted Africa's terms of trade -- the prices of imports compared with the prices for exports. This should produce a pause in Africa's economic decline. Per capita output this year should rise for the first time since 1980.
Even after this year's projected improvement, income per person in the poorest nations of Africa will remain 12 percent below the level at the start of the decade. In countries such as Chad, Niger, Tanzania, and Togo, the drop since 1980 will be roughly 30 percent -- a bit worse than that in the United States in the Great Depression.
Low-income Africa, the World Bank notes, is poorer today than in 1960. ``For the first time since World War II, a whole region has suffered retrogression over a generation.''
Exchange rates -- In 1984, the effective rates for low-income Africa began to decline after a full decade of appreciation. The trend continued in 1985. Gambia, Zaire, Guinea, and Zambia are establishing more flexible exchange-rate systems.
This trend is helpful because it reduces balance-of-payments deficits. Most African nations already suffer from severe foreign debt burdens. Further, it shifts internal economics in favor of those who produce for export, often mainly rural households, and away from those who consume imports, usually urban households.
In other words, proper valuation of a currency helps the bulk of the people who live in the countryside. It reduces the opportunity of the privileged city dwellers, especially friends of politicians, to make money on import licenses, smuggling, or other nonproductive activities.
Agriculture -- ``Years of neglect are now giving way to a recognition that agriculture is the backbone of African economies and that the policy bias in favor of urban consumers must be corrected in favor of rural producers,'' says Mr. Clausen.
Prices paid to farmers for a wide variety of crops are being increased and even decontrolled in some countries. The extra incentive has boosted cocoa production 25 percent in Ghana over the past two years. The amount of maize moving to market in Zambia was up 55 percent during the 1984-85 season, almost meeting that nation's domestic needs for the first time in 10 years. Cotton production doubled in Togo last year over 1984.
Government -- The role of the state in the economies of sub-Saharan Africa is larger than in other regions or the world. Public-sector employment is half of all employment in what might be called the modern sector, which excludes peasant farming. That compares with one-third in Asia. State-owned enterprises are relatively more numerous than in most other developing countries. These are often inefficiently managed; frequently invest unwisely; and drive out private enterprise.
Faced with financial straits, some African nations are taking their first steps to cut public-sector spending and improve its management. They are starting to woo private enterprise.
Overall, low-income African governments have divested about 5 percent of public enterprises during the 1980s. They have reformed the operation of many others. In Mali, for instance, the operating deficits of 13 key public enterprises were reduced 50 percent between 1981 and '84.
Population -- Some African nations are beginning at last to recognize that their population growth is too fast. So far, however, progress with birth control is small in relation to the task of achieving economically sound population growth, the bank reckons.
So economic reform has begun in sub-Saharan Africa. Clausen maintains it must be encouraged and supported by concessional financing from the industrial nations, money that can be used to step up imports of machinery, expertise, and other development needs. World Bank economists calculate a need for extra external financing of $2.5 billion a year from 1986 to 1990, even after allowing for known and expected aid flows and for rescheduling of debts.
The World Bank and other multilateral institutions can provide about $1 billion of the gap. The rest must come from well-to-do nations as foreign aid or further debt rescheduling. Any nation with credible reform programs, says Clausen, should get help.